"When fascism comes to America, it will be wrapped in the flag and carrying the cross."
-- Sinclair Lewis

Friday, April 15, 2016

More on the Bipartisan Government Scam to Protect TurboTax Profits

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In this instance, the big boys are all software companies (source; click to enlarge).

by Gaius Publius

“During the term of this agreement, the IRS will not compete with the Consortium ["of tax software companies"] in providing free, on-line tax return preparation and filing services to taxpayers.”
–IRS and Free File Alliance, LLC, Free On-Line

“I’m a Republican. My two colleagues on the board were Democrats. We unanimously supported continuing and extending the [taxpayer-friendly ReadyReturn] program…In all my years as a state senator, a U.S. congressman and state finance director, I never saw as clear a case of lobbying power putting private interests first over public benefit.”
–Former California State Senator Tom Campbell, Los Angeles Times, 2006

Recently we wrote about the effort by the tax preparation industry — Intuit, makers of TurboTax, H&R Block and others — to prevent the government from offering free online tax preparation services. The occasion of this examination is a bill sponsored by Elizabeth Warren and co-sponsored by a number of others, including Bernie Sanders, that would force the government to implement this service and prevent the IRS from entering into "profit protection" agreements like the one in 2002 that contained the language quoted at the top of this piece — "the IRS will not compete with the Consortium", etc.

All of this is explained in the report (pdf) released by Senator Warren's office in conjunction with that bill.

FDR Liberals and Neo-Liberals

As context, note that in the FDR-liberal world, the purpose of government is to "promote the general welfare" by providing services to citizens and protecting them from predatory practices and industries. The opposite is true in the neo-liberal world. In that world — a bipartisan world, by the way — the purpose of government is "wealth creation," which means creating as many profit opportunities as possible for powerful individuals and corporations.

That often (or usually) means turning over government services to the private sector and forcing citizens to go instead to corporations to get those services. Imagine, for example, if every freeway in the country were a toll road, managed by corporations and hedge funds who then got the first and largest cut of the revenue. Imagine if they got these contracts via campaign contributions. That would be a classic case of the neo-liberal use of government to make the wealthy wealthier.

Warren Documents IRS Collusion with Tax Software Companies

In the details of Sen. Warren's report, released along with the text of the bill, is a pretty clear example of that bipartisan effort to block the IRS from offering free tax preparation services. Consider the following, taken from numbered pages 8 through 10 of the report. I've underscored the company names and some of the perps so you can see how bipartisan this scam truly is (the numbers at the end of some of the sentences are footnotes in the original):

The tax preparation industry spends millions of dollars lobbying Congress to combat return-free filing systems and promote industry-sponsored filing services. According to a 2013 analysis by the Sunlight Foundation, “Companies that prepare taxes are throwing millions at Congress to oppose making tax filing easier. Since 1998, major tax preparers have spent almost $28 million lobbying Congress. ... Professional tax preparers like Intuit, H&R Block and others have opposed programs that would allow taxpayers to pay their taxes without filing a return for years.”72 Expenditures have increased since Sunlight’s analysis: as of 2016, just three large tax preparation companies, Intuit, H&R Block, and Jackson Hewitt, have spent nearly $41 million since 1998 on federal lobbying.73

Intuit has “[led] the charge against return-free filing.”74 Since 1998, Intuit has spent over $24 million on federal lobbying efforts.75 Intuit’s lobbying disclosures reveal intense efforts to combat return-free filing. Thirty-six of Intuit’s 41 lobbying disclosures related to taxes from 2015 show the company’s efforts to “support the IRS Free File Program,” while its 2008 to 2012 disclosures consistently “oppose IRS government tax preparation.”76

One of Intuit’s most vehement attacks on return-free filing came in 2005, as the California FTB sought funding for its ReadyReturn pilot. Intuit spent over $3 million to try to kill the program, and donated $1 million in 2006 to an interest group backing a ReadyReturn opponent in an election for state controller. ReadyReturn survived Intuit’s attacks, but did not emerge unscathed — without a marketing budget, the FTB had trouble getting word out to taxpayers about ReadyReturn.77 A former state senator described the situation bluntly in a 2006 Los Angeles Times editorial: “I never saw as clear a case of lobbying power putting private interests first over public benefit.”78

Since 1998, tax preparer and software provider H&R Block has spent almost $16 million lobbying the federal government, primarily focusing on tax issues. Its lobbying disclosures from 2006 to 2015 reveal the company’s interest in “issues impacting…tax preparers” and “matters relating to personal income taxation,” including “tax simplification” and “return-free filing.” The disclosures are also peppered with references to the Free File Alliance.79 Jackson Hewitt Tax Service, another tax preparer, has spent over $660,000 since 1998 lobbying the federal government on tax issues, including “return-free processing.”80

Other organizations lobby Congress extensively on behalf of the tax preparation industry. In 2011, ten of “the nation’s leading retail tax preparation and tax software companies and financial institutions” formed the American Coalition for Taxpayer Rights (ACTR), a nonprofit group devoted to preserving a “voluntary tax compliance system” and opposing “a presentment system, where taxpayers are presented with a bill by the taxing agency.” Membership includes Intuit, H&R Block, Jackson Hewitt, Liberty Tax Services, TaxACT, and TaxSlayer.81 Since 2011, the ACTR has spent $765,000 to lobby the government on several issues related to “legislation and regulation related to the provision or facilitation of tax services” and “simple filing.”82

The Computer & Communications Industry Association (CCIA) is a “tech advocacy” group whose members include Intuit and TaxSlayer.83 Since 1998, the company has spent over $8 million on lobbying. Although the organization does not advocate solely or even primarily on tax-related issues, in 2008 and 2009, the CCIA’s highest-spending lobbying years, disclosures show the group’s support for the Free File Alliance.84

The tax preparation industry continues to lobby against return-free filing legislation. In 2013, Senator Jeanne Shaheen (D-NH) introduced the Simpler Tax Filing Act of 2013, while Representatives Bill Foster (D-IL), and Mike Quigley (D-IL) introduced the Autofill Act of 2013. Both bills would have required the Treasury to offer pre-prepared returns to taxpayers. Disclosures show that Intuit and the American Coalition for Taxpayer Rights lobbied against both.859 10

Seven House or Senate bills have been introduced since 2000 that attempt to explicitly prohibit the IRS from developing or providing taxpayers with free tax filing services, seek to make the Free File Program permanent (thus indirectly blocking IRS return-free filing efforts), or both.86 For example, in 2007, Representatives Zoe Lofgren (D-CA) and Eric Cantor (R-VA) introduced H.R. 3457, which would have required the IRS to “enter into an agreement with the Free File Alliance” and prohibited the Treasury Department from “implement[ing] a return free system.”87 Intuit and the CCIA both lobbied on behalf of the bill. 88

Most recently, Representatives Ron Kind (R-WI) and Peter Roskam (R-IL) introduced the Free File Program Act of 2013 (H.R. 495), which would have made the Free File Program permanent and prohibited the IRS from implementing return-free filing.89 While introducing the bill, Rep. Roskam and Rep. Kind lauded the tax preparation industry, stating in a press release that “working together with the private sector to offer online tax preparation” represented “an important public private partnership.”90 S.669, the Senate’s version of the bill, was introduced by Senators Mark Pryor (D-AR), Rob Portman (R-OH), and Johnny Isakson (R-GA). Intuit, H&R Block, and the American Coalition for Taxpayer Rights all lobbied on behalf of S.669.91

During the 110th Caucus, the House Committee on House Administration first listed the “Free File Caucus” as a Congressional Member Organization.92 The Caucus promoted the interests of the Free File Alliance and is co-chaired by Representatives G. K. Butterfield (D-NC) and Mike Conaway (R-TX). Though the caucus was discontinued during the 111th and 112th Congresses, the group was reassembled during the 113th and 114th.93 Today, Rep. Matt Cartwright (D-PA) is also a member.94 Lobbying disclosures show that Intuit began pushing for the formation of a “free file caucus” in 2009.”95 In February 2016, Intuit praised Reps. Butterfield and Conaway and claimed the Free File Program “benefits from [their] leadership.”96

The report rewards the time you put into reading it if reading about rackets like these interests you. But I mainly wanted to follow up on the FDR-liberal vs. neo-liberal point I made earlier. This is a perfect illustration of its bipartisan nature. Both parties are perps in protecting the "wealth creation" going on at Intuit.

2 Comments:

Just sent off my income tax forms prepared through Turbo Tax. They charged me $64.99 and I did all of the preparation, my investment companies provided the information which was extracted for tax purposes. I don't even have to file state income tax, which usually costs more. So, what did I get for my $64.99? Well, they told me they charged me $4.99 for e-filing, which I thought was free from the IRS. What a racket! Disgusting. The only good thing about it is that a CPA would have charged me $200 to do the same thing. At least he would be held accountable if something was incorrect.